R.R. Donnelley & Sons Company bonds fell on rumors the printing company will be involved in a leveraged buyout. Its 5 1/2% '15 bonds fell four points to 87 7/8, while its 4.95% '14 notes were down to 86.7 from 93 1/2. It is unclear who the potential buyer may be.
Research firm Gimme Credit said it does not see R.R. Donnelley as an attractive buyout target, because its EBITDA margins, which have averaged 14% over the past three years, fall far below those generated by most LBO candidates.
R.R. Donnelley's free cash flow was $250 million in 2005 and it currently has $139 million in cash, according to a Gimme Credit report. "Most leveraged buyers are looking for greater cash pools to use to reduce the debt incurred in the buyout. R.R. Donnelley does not have much in the way of assets that it could sell to finance the acquisition," said the report. It added the company's forms and labels business could be a candidate for sale but doubts it would generate many proceeds. A R.R. Donnelley spokesman did not return calls seeking comment.